When will investors feel comfortable seeking growth? That seems to be the question that nobody can
answer. However, in this environment
that has yielded such low returns for savers, they have not exactly been
sitting on the sidelines. Wall Street
seems to think that if the high flying growth names are not moving then
investors must be sitting on the sidelines.
I contend that with multiple market blowups in the ten year period of
time ranging from 2000-2009, that individual investors have simply become
wiser. Sure the herd mentality will
always exist, but there are signs of strength.
The S&P 500 Index has been on quite a roll. Unfortunately, it has not received much
attention, but for those paying attention it really shows how important the
dividend payers have been to the surge in this large cap index. Can we stop talking about Facebook (FB)? Who cares!
Investors do not want to hear about Facebook. They want to hear about yield and the
opportunity to possibly yield more than the near 0% they are receiving in their
saving’s accounts. On the night of
Sunday June 3rd, CNBC ran a live “Markets In Turmoil” special. I couldn’t really see what turmoil they were
referring to being that the S&P 500 was still up 2.57% year-to-date at that
time. Since the special aired, the
S&P 500 has gained 10.33% as of the close on August 14th. I guess we can see who contributes to the
herd mentality.
Strength exists and it can be found in the dividend
payers. Over the last three years the S&P
500 has gained 48.83%. Where has the
strength in the index come from? Growth
has contributed, but when you look at the performance of the large cap
WisdomTree Dividend ex-Financials ETF (DTN) you will clearly see that it has
been large cap dividend payers leading the charge. Over the last three years DTN has gained
74.13%. Its run may not be over. As the markets continue to sort out the level
of uncertainty in the world and our own economy, I believe investors will
continue to seek yield. DTN still sports
an attractive dividend yield versus the S&P 500 Index. DTN’s trailing twelve month yield is 3.66% compared
to the S&P 500 (SPY) which is 1.95%.
For over a decade we heard how crappy the S&P 500
performed. Now we hear nothing about how
well it has performed. Soon it will
become a hot topic in the financial media which will help push the herd in the
markets direction. Unfortunately, I
believe by that point most of the good gains would have already been
gotten.
Thank you and good luck everyone!
Disclosure: I do not own DTN or SPY
Jon R. Orcutt, founder of Allocation For Life, is an
asset allocation strategist and author of “Master the Markets with Mutual
Funds: A Common Sense Guide To Investing Success”; Manager/Creator of the AFL
Model Portfolios available for members of Allocation For Life in self-directed
accounts at Folio Investing
http://www.allocationforlife.com/
http://www.allocationforlife.com/
